TalkTalk drops prices in battle for broadband customers

Thursday 20 July 2006 02.16 EDT
First published on Thursday 20 July 2006 02.16 EDT

The battle for broadband customers hotted up again yesterday when TalkTalk cut the cost of its "free" broadband deal following the banning of its advertisements that offered "free broadband forever".

With many wondering how something billed as free could become any cheaper, the residential arm of Carphone Warehouse surprised the industry by dropping the price of its combined phone and broadband package by a pound a month to £19.99.

The company said this was in response to an Advertising Standards Authority ruling that banned the "free forever" advertising campaign. But analysts said the move may have had more to do with Sky's announcement on Monday that it would offer its digital TV customers a "free" super-fast internet connection from August.

In July, TalkTalk blew its rivals away by offering an all-in-one phone and broadband package for £21 a month. The company had announced in April that it would be offering the package and had aggressively marketed its broadband service as "free" to those agreeing to buy its phone service for 18 months. More than 340,000 customers signed up in eight weeks.

Following 145 objections from individuals and competitors about the "misleading" adverts, the ASA yesterday banned the ads and said TalkTalk couldn't stand up the "forever" claim, even if its broadband offer was free. It also rapped the advertiser for not making clear that the broadband deal was available only to customers already connected to a qualifying telephone exchange.

By announcing yesterday's price cut, TalkTalk in effect said it preferred to lower the price rather than remove the "free broadband" claim from its adverts. It also scrapped its £30 connection fee.

Michael Philpott of the independent telecoms consultancy Ovum said: "This is something of a clever marketing ploy, which probably owes more to Sky's announcement earlier this week. It's slightly surprising given that TalkTalk was already the cheapest company in the market.

"It hopes that the broadband bit of the deal will eventually break even, while it makes its money from non-landline calls.

"This reduction allows TalkTalk to continue its claim to be the cheapest in the market."